Category: Eastern Europe

The European Union, International Monetary Fund, and World Bank collaborated on Wednesday to bail out Romania with a €20 billion loan – making Romania the third country in Eastern Europe, after Hungary and Latvia, to receive financial assistance to help survive the current recession.

A breakdown of the loan has the IMF issuing a majority of the funding at €13 billion, the EU committing €5, and the World Bank accounting for €1 billion. The extra €1 billion will be sponsored by a collection of smaller creditors and the European Bank of Reconstruction and Development.

The loan comes under the stipulation that Romania make severe cuts in public spending and wages, as well as with a strong urging from other EU members that the country recapitalize its banks and enhance its deposit guarantee scheme.

“I am aware of the hardships that Romania and its citizens are encountering at this time of crisis but I am confident that, with the right policies and with the help of the EU and other international bodies, they will emerge stronger,” said EU Economic and Monetary Affairs Commissioner Joaquín Almunia.

The governor of Poland’s central bank, Slawomir Skrzypek, said today that Poland would not be asking for a loan from the International Monetary Fund (IMF), unlike many of its cash-strapped neighbors.

“I am convinced the situation in Poland does not require any extraordinary actions of the IMF,” said Skrzypek this morning. He went on to claim that any country presently seeking aid could “stigmatize and discourage” investors.

Unlike much of Eastern Europe at present, Poland’s stability remains high and the country is expected to maintain positive economic growth this year while it weathers the economic crisis.

Danish beer producer Carlsberg AS has come to a distribution agreement with Mexico’s Grupo Modelo in which the former will supply Corona Extra to nine new markets in Eastern Europe. The two beverage industry rivals have come together in the hopes of exploiting an opportunity that will be mutually beneficial.

“The second step in the development of the alliance of Modelo and Carlsberg covers important parts of the Eastern European Countries which are a key strategic area for us,” Carlsberg senior vice president, Anton Artemiev, said.

The countries covered in the deal will include Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan, Kyrgyzstan, Belarus, and Moldova.

As the financial crisis continues to devastate economies worldwide, countries and banking institutions seem to be coming more and more isolated as they fight for self-preservation. This is exactly the kind of reaction that World Bank President Robert Zoellick fears will increase the strength and longevity of the crisis.

“A backyard backlash could pull us into an economic spiral,” Zoellick said. “The siren song of protectionism will make this worse.”

This is particularly a concern with Eastern Europe, where national currencies have plunged in recent months due to an over-reliance on exports. Latvia’s government was the first to collapse last week as others teeter on the edge.

Zoellick advocates a coordinated international effort to help sustain those economies which are most vulnerable.

Britain’s Prime Minister Gordon Brown is onboard, calling for backup from the International Monetary Fund: “We are proposing today … a $500 billion IMF fund that enables the IMF not only to deal with crises when they happen but to prevent crises.”